Seattle-based HomeStreet Inc. saw the largest increase in short interest among all US public banks in July after it posted a net loss in the second quarter.

Though it experienced a brief decrease in short interest in June, Homestreet was still one of the most-shorted banks during that month, according to S&P Global Market Intelligence data.

The parent company of HomeStreet Bank recorded a net loss of $1.67 per share in the second quarter, down from earnings per share of 27 cents in the first quarter and 94 cents in the 2022 second quarter. Net interest margin declined to 1.93% from 2.23% in the first quarter, due to "decreases in balances of lower cost transaction and savings deposits and overall higher funding costs."

Short interest in HomeStreet ticked up 3.4 percentage points from June 30 to 12.9% of all shares outstanding as of July 31, which also made it the third most-shorted US bank stock during the month. It was the seventh-most shorted US bank stock in June.

Per an Aug. 1 Bloomberg News report, the company is weighing options, including a potential sale for which it has reportedly tapped a financial adviser, as it also looks into raising capital and selling assets. However, Janney Montgomery Scott's Timothy Coffey said that a whole-bank sale could prove to be difficult and the company could settle for an asset sale.

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Sioux Falls, SD-based Pathward Financial Inc. had the second-highest increase in short interest in July. Short interest in the company's stock rose 3.1 percentage points to 8.7% of all shares outstanding as of July 31.

Beverly Hills, Calif.-based PacWest Bancorp posted the largest decrease in short interest in July, but remained the second most-shorted US bank stock during the month.

PacWest, which entered into a reverse merger deal with Banc of California Inc. on July 25, saw a 7.2 percentage point decline in short interest to 15.5% of all shares outstanding. Meanwhile, short interest in Banc of California increased 2.7 percentage points to 4.3% of all shares outstanding as of July 31.

Bank of Hawaii becomes most-shorted US bank stock

Honolulu-based Bank of Hawaii Corp. climbed up one position from June to become the most shorted US bank stock. As of July 31, short interest in Bank of Hawaii as a proportion of its shares outstanding was 21.6%.

Bank of Hawaii reported second-quarter earnings of $1.12 per share, compared to $1.14 per share in the previous quarter and $1.38 per share in the same quarter a year earlier. Net income for the second quarter was down 1.7% quarter over quarter to $46.1 million, and off 19% from the prior-year period.

Keefe Bruyette & Woods analyst Kelly Motta downgraded the company in July to "underperform" and reduced its 2023 and 2024 EPS estimates.

"At current levels, we believe upside is limited as valuation is divorced from the fundamentals of this franchise, which has much more muted profitability and limited balance sheet flexibility in a higher for longer environment, in our view," the analyst wrote in a July 25 note.

Bank of Hawaii was actually among the 20 best-performing US bank stocks in terms of total return in July, ending the month with a total return of 38.6%.

Others on the list of most-shorted banks in July included Bank OZK and Zions Bancorp. NA.

Of the 20 most shorted US bank stocks, 14 were regional banks with $10 billion to $100 billion in total assets, four of which had $50 billion or more in total assets.

Short interest declines across the board

The median short interest for all US public banks declined 9 basis points to 1.35% of all shares outstanding at July 31.

Banks across asset buckets registered declines in their median short interest, with those having over $100 billion in total assets posting the largest decrease at 32 basis points.